Update On Planning For Bitcoin And Other Cryptocurrency – Forbes

So, who will be watching you?

A virtual currency guidance and advisory issued by the U.S. Treasury Departments anti-money laundering (AML) unit on June 30, 2021 clarified regulatory expectations, riled some cryptocurrency players and signaled a potential new global standard for combating financial crime.

The statement added that the guidance does not establish any new regulatory expectations and consolidates current FinCEN regulations, guidance and administrative rulings. FinCEN has broad international reach to any business doing substantive business with U.S. persons and therefore international businesses need to be paying attention if they source cryptocurrency from U.S. exchanges or interact with U.S. consumers.

Any time FinCEN issues an advisory, compliance officers in both banks and virtual currency companies will spend a fair amount of time over the next few days reviewing the advisory in the context of their businesses and customers.Concerns include another round of bank account closures, not because customers are engaging in illegal activity, but because compliance officers and managers lack an understanding of the technology underlying cryptocurrencies as the easy way out rather than invest the time and effort to learn more about the space.

Although owners of blockchain based investments most commonly hold cryptocurrency, blockchain technology is expanding into non-currency areas.In both, however, there are risks mainly because 1) estate planners and family members are ill-informed about the presence and nature of blockchain assets, 2) clients fail to realize that wills and trusts must have specific language to allow Personal Representatives and Trustees to manage those assets after incapacity or death, and 3) the regulatory environment, taxation, reporting, application if intestacy laws and other issues have yet to be resolved.

Traditional planning entities also have a hard time owning cryptocurrency, especially if there is a fiduciary duty owed to beneficiaries to prudently invest assets. Without specific language, a trust or other entity will not be able to hold cryptocurrency, but if that language is written too broadly, the fiduciary may be exempt from damages due to willful neglect. Also, cryptocurrency is treated as property rather than as currency by tax authorities for tax purposes meaning that the fair market value is set by conversion into the taxing authoritys currently, that is U.S. dollars for the IRS, at a reasonable exchange rate and transactions involving cryptocurrency are subject to the capital gains tax regulations. This can result in the cryptocurrency being taxed at one value in one country and another value in another country.

On top of all this, care needs to be taken to preserve the benefits of cryptocurrency. Cryptocurrency is highly secure, but that security is in jeopardy if the private key or seed phrase is carelessly recorded.With the right private key or seed phrase, anyone can access the cryptocurrency, so planning and procedures have to include how to secure this information. Like cash, cryptocurrency is not traceable. There is no electronic or paper trail linking the parties together in a transaction involving cryptocurrency.To preserve that privacy, you will need to plan that other documentation in the transaction does not reveal these identities, or at least that information is privileged. Shorter transfer delay and lower costs.Unlike hard currency, transferring cryptocurrency takes only moments and there are few, if any, transfer costs.

So, what to do? First, educate your estate planner and family about any blockchain based assets, especially cryptocurrency, you own. If the value of those assets exceeds $10,000, and the assets are in custody with a fiduciary or institution that is offshore Make sure that you are also reporting that investment annually and that the custodian that holds the assets has the capacity to invest the time and effort required to comply with the myriad changes as they occur.

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Update On Planning For Bitcoin And Other Cryptocurrency - Forbes